What is proforma invoice?
Proforma invoice is an informal document to make price offers of goods and services. In advance of a formal sales agreement, the seller sends a proforma invoice to the buyer to clarify the price of goods/services and terms and conditions such as insurance, payment terms and incoterms.
To give an example; a landscaping company from Germany is interested in importing pebbles from a natural stone exporter from Turkey. As per the buyer’s request, the seller prepares a proforma invoice with the details below:
- Proforma Invoice No and Date
- Company name, address, vat no, phone and email address of both exporter and importer
- Unit price, amount, total,
- Quantity, gross/net weight, Packaging
- Country of origin
- Payment Term
- Exporter’s bank account details
- Signature section
As seen on the PI, there is not a clause for insurance and international freight because the seller quotes as FOB which means they are not borne by the seller whose responsibility is only to load the containers to the ship. We would see them only if it was CIF.
After the exporter sends the PI -via mostly email- the importer checks it and sends back duly signed if it’s ok and it’s done; both parties agree on the terms and the production starts upon 40% payment.
You can download a copy of this simple PI and use for your business.